If you want to get approved at the best possible terms when buying a car, it’s important you know a car lender’s credit guidelines before you apply for credit…especially if you’re bankrupt.
It will save you time and frustration–but more importantly, it will help you avoid credit inquiries that may lower your FICO credit scores up to 12 points per inquiry.
Step 1 in making a lease or buy decision is to determine a lender’s credit guidelines.
You start by asking if they lend to people with a bankruptcy. If so, on what terms?
That’s right. You have to be upfront that you’ve filed bankruptcy. Don’t hide it. We have to face the fact that some dealers just won’t work with people who’ve filed bankruptcy. So our job is to find the ones that do.
Some lenders will only lease to people with a bankruptcy. Others will only offer purchase financing. Yet still others will only lend using a hybrid of the two–this is especially common in Texas.
Ask the finance director at the dealership to direct you as to what structure the manufacturer prefers.
And here’s a quick tip for you: if your bankruptcy doesn’t appear on the credit report your lender pulls–then, in the eyes of the lender, you’re not bankrupt.
The only lenders I would consider using are:
– First choice: Captive lenders (car manufacturers)
– Second choice: Banks (not finance companies)
– Third choice: Credit unions
Ninety-nine percent of the cars I’ve leased over the years have been with captive lenders. Just one was leased by a bank.
That particular deal came from a conversation I had with Amy, the finance manager at the local Land Rover dealership here in Indianapolis. I told her I was open to her financing recommendations, but I preferred financing through the car manufacturer.
I told her my current FICO scores. She immediately said that with my scores she could do better through a local bank. I signed a credit application and told her to go for it.
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